TRANSPORT CORRIDORS PROJECT (TCP) - MINISTRY OF CONSTRUCTION, HOUSING AND MUNICIPALITIES AND PUBLIC WORKS BAGHDAD - IRAQ STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 WITH THE INDEPENDENT AUDITORS' REPORT TRANSPORT CORRIDOR PROJECT Glossary Acronym Definition GOI Government of Iraq MOCH Ministry of Construction, Housing and Municipalities and Public Works IBRD International Bank for Reconstruction and Development TCP Transport Corridors Project PFM Public Finance Management PMT Project Management Team PUBLIC FINANCE MANAGEMENT PROJECT Table of contents Contents Page Independent Auditors' Report 1-2 Statement of Cash Receipts and Payments 3 Notes to the Statement of Cash Receipts and Payments 4-7 Kawasmy & Partners CO. Amman - Jordan Shmeisani, A-Shareef Abdul Hameed Sharaf Sir BLD # 28 Tel: +962 6 5650700, Fax: +962 6 5688598 INDEPENDENT AUDITORS' REPORT To The Ministry of Construction, Housing and Municipalities and Public Works, Roads and Bridges Directorate. Transport Corridor Project (TCP) Iraq-Baghdad Opinion We have audited the accompanying statement of cash receipts and payments the "financial statement" of the Transport Corridors Project Loan No.8322- IQ for Iraq (PFM) as at December 31, 2018 and a summary of significant accounting policies and other explanatory notes. In our opinion, the statement of cash receipts and payments present fairly, in all material respects, cash receipts and payments of the project as at December 31, 2018, in accordance with accounting for cash receipts and payments as defined under the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting". Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statement section of our report. We are independent of the Company in accordance with International Ethics Standards Board of Accountant Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Basis of Accounting and Restriction on Use Without modifying our opinion, we draw attention to note 2 to the financial statement which describes the basis of accounting. The financial statement is prepared to adequtely reflect the cash reciepts and payments of the project as a result, the financial statement may not be suitable for another purpose. Our report is intended solely for Ministry of Construction, Housing and Municipalities and Public Works in Iraq and the TCP and should not be disributed or used by other than Ministry of Construction, Housing and Municipalities and Public Works of Iraq and the TCP. Responsibilities of Management and Those Charged with Governance for the Financial Statement Management is responsible for the preparation and fair presentation of the financial statement in accordance with accounting for cash receipts and payments as defined under the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting", and for such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. In preparing the financial statement, management is responsible for assessing the project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the project or to cease business, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. KPMG Kawasmy & Panners Co., a registered Jordanian partnership under No. (226). is a member Farm of KPMG International, a Swiss cooperative. I Auditors' Responsibility on the Financial Statement Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial statement. As part of an audit in accordance with International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the dale of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the financial statement, including the disclosures, and whether the financial statement represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on contracts and compliance requirements - Internal control over financial reporting involved in the preparation of direct payments, payments through special commitments, advances and reimbursements on the basis of the statement of cash receipt and payments can be relied upon to support the related withdrawals for the year ended December 31,2018. - The project is in all material respects in compliance with the laws, regulations, guidelines and provisions governed by the loan agreement. Kawasmy & Partners KP MG Hater . Amman - Jordan els CO* June 16, 2019 2 TRANSPORT CORRIDORS PROJECT (TCP) STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 (Accumulated since inception) From 31 For the year March 2015 till 31 ended 31 In USD Note December 2017 December 2018 Total Cash receipts World bank: direct payments 59,126,598 33,871,066 92,997,664 Designated account 3 5,000,000 - 5,000,000 Reimbursements by the World Bank 4 2,746,238 216,568 2,962,806 Total Cash receipts 66,872,836 34,087,634 100,960,470 Cash disbursements Work - Constructions 7 (59,126,598) (33,871,066) (92,997,664) Goods procurements 7 (11,779) (840) (12,619) Consultants' services 7 (2,715,395) (1,723,188) (4,438,583) Travel and training expenses 7 (169,112) (102,863) (271,975) Operating cost 7 (66,520) (48,223) (114,743) Total cash disbursements (62,089,404) (35,746,180) (97,835,584) Temporary advance (11,000) 10,000 (1,000) Excess of cash receipts over cash payments 4,772,432 (1,648,546) 3,123,886 The notes on pages from 4 to 7 are an integral part of this financial statement. PMT-Finance Manaer PMT-Project Leader 3 TRANSPORT CORRIDORS PROJECT (TCP) NOTES TO THE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED DECEMBER 31,2018 1. Background According to the agreement signed between the Government of Iraq (GOI) and International Bank for Reconstruction and Development (IBRD), The GOI have received financing in the amount of US$ 355 million from the World Bank (WB) to support the implementation of Transport Corridors Project (TCP) which started at March 31, 2015. The overall objective of the project is to improve the quality and delivery of road infrastructure services through a combination of road rehabilitation investment and institutional development for Ministry of Construction, Housing and Municipalities and Public Works. The objective of the Project is to improve road transport connectivity and safety on selected road sections along Expressway No. I and North-South transport corridor in Iraq, The Project consists of the following parts: Part A: Transport Corridors Improvements (1) Rehabilitation, maintenance and road safety improvement of select sections of Expressway No.1 road network. (2) Design and construction of service lay-bys including designing and construction of access roads and facilities to facilitate movement of people with limited mobility on these sections. (3) Design and construction on a pilot basis ofa fiber optic cable network. (4) Carrying out supervision ofcivil work and environmental and social management associated with the civil works. Part B: Institutional Strengthening and Capacity Building in the Road Sector Carrying out a program of technical assistance to strengthen the capacity of Borrowers' institutions and other stakeholders to plan and manage road assets effectively such a program to consist of the following activities. 1- Support organizational and capacity improvement at MOCH and RBD through: (A) Developing an effective road sector organizational structure with clear responsibilities at all levels. (B) Provision of technical advisory services to enhance road sector governance. (C) Awareness raising on routine maintenance and improving capacity. (D) Development of information and communications systems designed to enhance the effectiveness and efficiency of road management. (E) Provision of on-the-job training to strengthen capacity of RBD in strategic planning, program, maintenance and supervision. (F) Strengthen capacity in procurements, financial and contract management. (G) Provision of technical advisory service to support the analysis and development of relevant regulation and standards that apply to all phases of the road life cycle. (H) Provision of training to managerial and technical staff of RBD. (1) Provision of technical assistance for highways and road sector related studies. 2- Carrying out a program of organizational improvement of state-owned and MOCH controlled construction companies. 3- Provision of training to local contractors and consultants to enhance their capacity in overall project management and thereby improve the quality of their bid submission and delivery of high quality products including studies, design structure on time. Part C: Proect Mananement and Monitoring Carrying out project management and support activities necessary for effective implementation of the project by RBD, Including the provision of technical assistance and training. 4 TRANSPORT CORRIDORS PROJECT (TCP) NOTES TO THE STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED DECEMBER 31,2018 2. BASIS OF PREPARATION a) Basis of accounting The statement of cash receipts and payments (the "financial statement") have been prepared in accordance with accounting for cash receipts and payments as defined under the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting". On this basis revenue is recognized when received rather than when earned, and expenses are recognized when paid rather than when incurred. The statement of cash receipts and payments was authorized for issue in accordance with the PFM leader approval on June 16, 2019. b) Reporting and functional currencies The financial statement has been presented in United States Dollars (U.S. Dollars) which is different from the currency of the country where the PFM is domiciled which is the Iraqi Dinar due to the fact that most of the transactions are denominated in the U.S. Dollars. 3. Designated payment World bank advance loan proceed into designated account of the borrower to finance eligible expenditures as they are incurred, and this account will be reimbursed subsequently from the world bank to cover payments. 4. Reimbursements by World Bank Reimbursements by World Bank presented in the statement of cash receipts and payments are reimbursements of expenses paid by the project during the project period and reimbursed in subsequent period. 5. Front End Fee In accordance with the Loan agreement Republic of Iraq is payable to the world bank a front end fee rate equal to one quarter of one percent (0.25%) of the loan amount. Calculation of the Front End Fee calculated as follow: Loan Amount from the World Bank 355,000,000 Front End Fee rate 0.025% 6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been adopted in the preparation of the financial statement: a) Cash receipts Cash receipts are recorded when funds are deposited in the PFM bank accounts. b) Cash payments Cash payments are recorded when funds are transferred from the PFM bank accounts. 5 оо .-� м��D � � � и и и и и и и О О t� � G�D и N N N N N N N р р ц'i с оо t � о� оо rv �� t^� --� м С р а� о с и оо о .- r�о n ю�л �о ец о М L' С �' К1 М М � � N N N N N N N N � � .с. 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Designated Account Movements: The below table show movements on the cash of designated account during the year: 2018 Cash balance in designated account per project records as at January 1 4,772,432 Deduct: cash outflow during the year (1,875,114) Add: Reimbursements from World Bank for the year 216,568 Add (Deduct): Temporary advance 10,000 Cash in designated account balance per project records as at December 31 3,123,886 Cash balance in designated account as per bank letter as at December 31 3,123,886 7